Annual Report 2020
Year ended March 31, 2020

TERAOKA SEISAKUSHO CO., LTD.

Teraoka Seisakusho Co., Ltd.

15

PROFILE
Since its establishment as a comprehensive manufacturer of adhesive tape in 1921,
Teraoka Seisakusho Co., Ltd. has remained an industry leader in driving development oforiginal and advanced technology, providing customers with a diverse lineup of adhesive
tapes that extend to packing, electrical insulation, electronic equipment, other industrial
and general home-use adhesive tapes.
With the intensifying of demand of corporations for social responsibility, environmental
considerations are becoming increasingly more important in corporate activities. At
Teraoka Seisakusho, we have introduced cogeneration equipment in the Ibaraki Factoryas an environmental measure. We plan to use this in our goal of reducing the amount ofenergy we use as well as CO2 emissions. This equipment is a system that reduces
energy costs and CO2 by supplying power via our Company’s generator and effectively
using the heat emitted at that time.
The Ibaraki plant system generates power to energize the factory with the engine
generator, for which fuel has been changed from heavy oil to liquid natural gas (LNG),
and uses steam and cold water in the air conditioning equipment of the clean room, etc.
Electricity continues to be supplied from the power transmission, but partial production
is possible even in the event of a power outage. Likewise, the steam boiler fuel has beenchanged from heavy oil to LNG and we continue to make efforts to reduce energy costs
and CO2 as well as take initiatives for a low-carbon and recycling society.
Furthermore, from this fiscal year our motto has become, “First change, then makechange.” It is precisely because of this unprecedented situation and difficulty that flexible
and dramatic reforms have happened at a much faster rate. By turning this fiscal year,
which marks the 100th anniversary of our founding, into an extremely importanttransition period for the next generation, we can establish our position as a company withclear value, importance and presence, as well as a source of progress and development.

Cogeneration equipment at Ibaraki factory

CONTENTS
Consolidated Financial Highlights.......................... 1
To Our Stockholders................................................. 2
Review of Operations ............................................... 4
Consolidated Five-Year Summary .......................... 6
Consolidated Financial Statements ....................... 7
Financial Review ....................................................... 8
Report of Independent Auditors ............................. 25
Company Data ........................................................... 27
Investor Information ................................................. 29
10

Teraoka Seisakusho Co., Ltd.

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FINANCIAL HIGHLIGHTS

For the years ended March 31,
Thosands of
U.S. dollars

Millions of yen

2020

2019

2020

¥22,895¥23,558$210,377

Operating Income

104

1,144

954

Income before Income Taxes

317

1,366

2,917

Net Income

149

1,034

1,374

Total Assets

35,14035,854

322,888

Net Assets

27,93928,978

256,723

Operating Income to Net Sales

0.5

4.9

Equity Ratio

79.5

80.8

Return on Average Assets (ROA)

0.4

2.9

Return on Average Stockholders’ Equity (ROE)

0.5

3.6

Net Sales

Ratio (%)

Per Share

Yen

U.S. dollars

Net Income¥ 5.90¥40.84$0.05

Cash Dividends

10.00

14.00

0.09

The U.S. dollar amounts in this annual report are translated from yen, for convenience only,at the rate of ¥108.83 = US$1, the rate prevailing on March 31, 2020.

Net Sales

Net Income

Total Assets(¥ billions)(¥ millions)(¥ billions)
40

1,200

30

1,000
30
800

20

20

600

10

400
10
200

0

16

17

18

19

20

0

16

17

18

19

20

0

16

17

18

19

20

Teraoka Seisakusho Co., Ltd.

1TO OUR STOCKHOLDERS

Result for FY 2020

Fiscal year 2020, the year ended March 31, 2020 marks the 110th business term for theCompany Group.
Although Japan’s economy in this consolidated accounting fiscal year showed strenuous efforts in exports and capital investment up to the third quarter, individual consumption
remained slow. Since the end of last fiscal year, the COVID-19 pandemic rapidly caused
the stagnant economy to deteriorate. Meanwhile, on a world scale, in addition to a stagnant
market sentiment due to trade friction between the U.S. and China since the start of the fiscal
year, COVID-19 spread throughout the entire world, making the economic deterioration evenmore serious.
Amidst this business environment, the Company Group demonstrated our strength inmobility, focusing on expansion to the East Asian market, but with the ill effects on the economies of various countries, especially China, due to the drawn-out trade friction between the
U.S. and China and COVID-19, sales dropped compared to the same period the previous
year, especially of electrical insulation and electronic equipment tapes.
As a result, sales for the Company Group for the consolidated fiscal year were ¥22,895
million (US$210,377 thousand), decreasing 2.8% from the previous year. In terms of profit,
while times were tough, operating income was ¥104 million (US$954 thousand) thanks to our
focus on realizing effects of reviewing unprofitable products and detailed operating management activity from the fourth quarter. This was a 90.9% decrease from the previous fiscal
year. Due to the foreign exchange loss calculated at the beginning of the fiscal year with thestrengthened yen, consolidated income before income taxes was ¥317 million (US$2,917
thousand), a 76.8% decrease from the previous term. In moving forward with our policy ofgradual dissolution of mutual share holdings, net income attributable to the parent company
for the year was ¥149 million (US$1,374 thousand) due to posting selling profit of investment
securities in the second quarter, which was an 85.6% decrease compared to the previous
fiscal year.

Operating Problem Prevention(1) Promotion of health and safety activities
In addition to making it clear that occupational safety is the top priority for management,
we will also work on eradicating occupational accidents company-wide. We will continue
to improve safety and sanitation management and comply with legislation related to safety
and health and company regulations by continuous, comprehensive and proactive action
by the safety and health committee.
(2) Enhancement of Compliance Structure
The Company Group is dedicated to creating a healthy corporate environment we can beproud of while achieving our CSR (corporate social responsibility). Moreover, we will bemaking compliance enhancement (corporate ethics and compliance with laws), and further
we will be increasing employee compliance awareness through company-wide education
programs using training and e-learning while also conducting company-wide proactive efforts through a compliance committee.
(3) Enhancing Quality Management and Assurance Arrangements
While thoroughly implementing quality management education based on company rules
and principles, we are also building a system that facilitates response to demand from industries with the highest level of quality management by introducing an inspection systemthat eliminates human error. Furthermore, we will strictly operate the inspection systemand the production management system that is currently being built, to improve corporate

2

Teraoka Seisakusho Co., Ltd.

value of the Company Group and achieve common interests
with our shareholders.
(4) Establishing Continued Operating Profit on Sales
The Company continuously takes initiatives to improve andensures improved Operating Profit on Sales through deep andcomprehensive understanding of customer needs by actively
communicating with product users, reviewing unprofitableproducts and conducting effective and new sales activities byconcentrating human resources in focus segments.
(5) Production system organization and new productdevelopment for the future
Along with reviewing our craftmanship from the roots, proactive capital investment and improving quality and productivity
in order to build an optimum production system, we are making progress in organic collaboration between manufacturing,
research and sales departments and will strive to put new
products with a high profitability and high expected added
value on the market in a timely manner, with consideration forenvironmental issues.
(6) Enhancing Personnel Training
The Company Group recognizes that the source of business competitiveness that is not influenced by the dramatically changing economic environment is found in people,
and enhancement of human resource management to makethe most of the abilities of each employee is necessary inall departments including sales, manufacturing, R&D andmanagement departments. Along with flexibly responding tochanges, we will create a business model and new systems
for conducting business and in order to cause reform, we arebuilding a system where it is possible for the company andemployee to grow together.

Dividends

The end of term dividend was distributed at ¥5.00 (US$0.05) per share and the mid-term dividend preceding it was ¥5.00 (US$0.05) per share for a total of ¥10.00 (US$0.09) per share inannual dividends.
We would like to take this opportunity to express our sincere gratitude to our shareholders fortheir continued patronage and support.
June 23, 2020

Keishiro Teraoka,
Chairman

Kenichi Tsuji,
President

Teraoka Seisakusho Co., Ltd.

3REVIEW OF OPERATIONSThe Company Group R&D is held up by the pillars of both
short-term and medium to long-term perspectives, developing new products based on adhesive tapes and resin
sheets, developing materials with new function, developing
new manufacturing methods, introduction of new technology thanks to external alliances, environmental measures,
improved quality, improved stability in production andsales, etc.
The market continues to evolve. For example, the automotive and telecommunication industries are undergoing
dramatic reforms based on concepts that differ from pastmethods, causing a paradigm shift. With this, the needs of
the Company Group’s customers has also become morediverse and sophisticated. The demand for environmental
considerations is also increasing in many industries andservices. The entire world has become aware of viral infection as a new risk due to the COVID-19 pandemic that has
plagued us since the beginning of 2020. The fact is thatthe risk of viral infection not only affects and threatens thehuman body, but also has an extremely significant impact
on the economy by the way infection prevention measures
slow production activities and services. It has been determined that the research and development system that can
provide stable products, supply value and solutions to themarket is extremely important in a changing environment
with such a massive impact on the economy.
In addition to taking our current technologies to thenext level against these trends, by tackling developmentof new technology and capital investment, the Company
Group hopes to continue to ensure provision of stable
and high-quality products that will satisfy our customers, provision of solutions
through both existing andnew products, creating value
to be provided to customers,
creating value with customers and provision of productswith high added value, as
well as provision of stableproducts and services. We
have already started efforts
to contribute to society in response to risk of viral infection from a CSR perspective.
New achievementsin this consolidated fiscal
year include new productdevelopment of advanced-

Sales of Electrical Insulation andElectronic Equipment Tapes

Sales of Packing Tapes(¥ billions)
5
4

fixation double-sided tape, strong adhesive double-sided
tape, advanced-sealing double-sided tape, heat-resistanttape, heat management tape, etc. Also, new technological development expected to be launched in the medium
to long-term saw progress in environmental technology
development such as new adhesive material development,
new functional coating material development, foam sheet
applied technology development, solventless technology
and petroleum alternative developments. Furthermore, we
are actively investing in equipment, moving forward withexpanding our R&D system by introducing experimental
equipment related to new adhesive production methods,
sheet forming, various analytical equipment and practicalevaluation equipment, among others. Regarding environmental technology, due to the high demand for environmentally friendly products, we intend to focus on environmental technology development. Also, going forward we
will draft technical strategies that span from the short tomedium-term and will proceed in creating and implementing themes based on these strategies, then shifting topartial implementation. We also hope to continue implementing prior investment according to technology/productstrategies and market trend forecasts.
Total R&D costs in this consolidated accounting period were ¥1,067 million (US$9,806 thousand), increasing
14.3% over the previous year. Furthermore, R&D accounted for 4.7% of consolidated sales, which was a 0.7 point
increase over the previous fiscal year.
Individually by department, the sales department ismaking efforts to improve gross profit by reviewing unprofitable products and reorganization along with focusing on
expanding new products related to automotive electricalcomponents and for mobile devices, which have potential
for development in a variety of markets. In the technology department, while focusing on new products, we also
made efforts to improve production through effective stabilization of inventory operations and quality. Management
has decided on a new personnel system that promotes
individual growth and enhances efforts of the organization as a whole, and is also continuing efforts to reformthe corporate culture through comprehensive compliancetraining, while also enhancing audit function.
The result was that consolidated sales for the corporate group were ¥22,895 million (US$210,377 thousand).
The Company Group business consists of a single segment, manufacture and sale of adhesive tape. However,the following is an explanation of the state of sales byproduct division.

Sales of Other Industrial Tapes(¥ billions)(¥ billions)
8

14

3.8

3.7

3.7

3.7

12

3.6

3

11.1

10

11.6

12.2

6.9

11.7

10.3

7.3

7.5

7.6

7.6

17

18

19

20

6

8
4

6

2

4

2

1
2
0

4

0

0

16

17

Teraoka Seisakusho Co., Ltd.

18

19

20

16

17

18

19

20

16

BREAKDOWN OF SALES BY CATEGORY

51.1% Electrical Insulation and15.8% Packing Tapes

Electronic Equipment Tapes

Olive cloth tapes● Kraft paper tapes●●

Polypropylene film adhesive tapes●

Polyester film adhesive tapes●

Acetate cloth adhesive tapes
Combination adhesive tapes●●●

33.1% Other Industrial Tapes●

Double-coated adhesive tapes

Corrosion-proof tapes● Masking cloth tapes●●

R

Kapton film adhesive tapes
Nomex adhesive tapes
R●

Glass cloth adhesive tapes●

EMI/RFI shielding tapes●

Silicone rubber adhesive tapes

Surface protection tapes

Packing Tapes

CHANGES IN OVERSEAS SALES(¥ billions)
10

GEOGRAPHICAL SALES MARKETS
8

Asia

27.6%

8.03

8.02

7.61

7.31
6.59

Japan

6

69.0%

4

2

North America

016

17 % 18
1.5

19

20

Europe0.9%
Other areas

GEOGRAPHICAL SALES MARKETS

1.0%

Asia

22.1%

Japan

65.0%

North America

10.3%
Europe1.1%
Other areas

1.5%

While consumer-related products, mainly mail-order sales, performed well, there was a decline in tape demands related to overseas projects, construction and civil engineering. Therefore, consolidated sales for this product were ¥3,622 million (US$33,283
thousand), which is a 2.7% decrease from the previous year. This
segment made up 15.8% of consolidated sales, which was theexact same percentage as last year.

Electrical Insulation and Electronic Equipment Tapes

While automotive equipment tape sales were steady, sales forthis sector were only ¥11,696 million (US$107,475 thousand) due
to a downward shift of electronic equipment process tapes andtape for overseas mobile devices. This was a 4.1% decrease
from the previous fiscal year. This segment accounts for 51.1% of
total consolidated sales and has decreased by 0.7 points over theprevious term.

Other Industrial Tapes

While new uses as measures against typhoons were discoveredfor polyethylene cloth tapes, which are major products used ininfrastructure and construction, due to withdrawal of some unprofitable products and the downward shift of automotive equipment tapes, sales for this product segment were ¥7,577 million(US$69,619 thousand). This is a 0.7% decrease from the previous term. This segment accounts for 33.1% of total consolidated
sales and has increased by 0.7 points over the previous term.

Overseas Sales

The Company Group has expanded activities overseas by establishing corporate bodies and bases in Hong Kong SAR, Shanghai, Shenzhen, Indonesia, South Korea, as well as Taiwan.
Looking at overseas sales for the current consolidated fiscal
year by segment, Packing Tapes were ¥248 million, a decrease of
9.7% while Electrical Insulation and Electronic Equipment Tapes
sales were ¥7,511 million, increased by 0.2% from the previous
year, but Other Industrial Tapes were ¥272 million, which was
a 5.9% increase over the previous term. The result of this wasoverseas sales of ¥8,031 million (US$73,795 thousand) in thissegment, 0.1% growth compared to the previous term. This also
accounted for 35.1% of consolidated sales. This was a 1.0 point
increase compared to the previous term.
Teraoka Seisakusho Co., Ltd.

5

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FIVE-YEAR SUMMARY

Thousands of
U.S. dollars

Millions of yen

2016

2017

2018

2019

2020

2020

¥21,771¥21,262¥22,816¥23,558¥22,895$210,377

1,144

1,039

1,319

1,144

104

954

Income before Income Taxes

991

768

1,291

1,366

317

2,917

Net Income

727

616

921

1,034

149

1,374

Total Assets

33,49534,64035,57535,85435,140322,888

Net Assets

27,96327,994

28,68628,97827,939256,723

Operating Income to Net Sales

5.3

4.9

5.8

4.9

0.5

Equity Ratio

83.5

80.8

80.6

80.8

79.5

Return on Average Assets (ROA)

2.1

1.8

2.6

2.9

0.4

2.6

2.2

3.3

3.6

0.5

Years ended March 31

Net Sales
Operating Income

Ratio (%)

Return on Average
Stockholders' Equity (ROE)Per Share

Yen

Net Income¥27.62¥23.96¥36.37¥40.84¥ 5.90$0.05

Cash Dividends

11.00

11.00

12.00

14.00

10.00

0.09

The U.S. dollars are translated at the rate of ¥108.83 per US$1, prevailing on March 31, 2020.

6

U.S. dollars

Teraoka Seisakusho Co., Ltd.

CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year 2020
Year ended March 31, 2020

Teraoka Seisakusho Co., Ltd.

7

FINANCIAL REVIEWBusiness Performance
Net Assets(¥ billions)
30

20

10

0

16

17

18

19

20

Net Income
per Share (Yen)
40

30

20

In thisconsolidated
fiscal year, in addition to the drawn-out trade friction between the U.S.
EquityRatio
and (%)
China up to the third quarter and spread of COVID-19 since the beginning of the year, theCompany Group’s environment has remained unpredictable with suspended economic activi100
ties due to lockdowns and self-quarantine in major cities and massive dips in sales of electrical and electronic tapes compared to the same periods the previous year.
80 Under these circumstances, individually by department, the sales department is making
efforts to improve gross profit by reviewing unprofitable products and reorganization alongwith focusing on expanding new products related to automotive electrical components and for60
mobile devices, which have potential for development in a variety of markets. In the technology department, while focusing on new products, we also made efforts to improve production
through
effective stabilization of inventory operations and quality. Management has decided
40
on a new personnel system that promotes individual growth and enhances efforts of theorganization as a whole, and is also continuing efforts to reform the corporate culture through20
comprehensive
compliance training, while also enhancing audit function.
The result was that consolidated sales for the consolidated fiscal year decreased by
2.8%
over the previous term to ¥22,895 million (US$210,377 thousand). Although circum0
16 were17 trying
18 19with20the drawn-out trade friction between the U.S. and China up to thestancesthird quarter and spread of COVID-19 since the beginning of the year leading to massive dipsin salesof electricaland electronic tapes compared to the same periods the previous year,
Returnon Average
Assetsincome(ROA) (%)
operatingwas ¥104 million (US$954 thousand), a 90.9% decrease from the previous fiscal year thanks to our focus on realizing effects of reviewing unprofitable products and3detailed operating management activity from the fourth quarter. Income before income taxes
was ¥317 million (US$2,917 thousand), a 76.8% decrease from the previous term due to theforeign exchange loss calculated at the beginning of the fiscal year with the strengthened yen.
In moving forward with our policy of gradual dissolution of mutual share holdings, net income2
attributable
to the parent company for the year was ¥149 million (US$1,374 thousand) due
to posting selling profit of investment securities in the second quarter, which was an 85.6%
decrease compared to the previous fiscal year.
1
Segment
Information

10

0

16

17 18 19

20

Cash Dividends
per Share (Yen)
15

10

5

0

8

16

17 18

19 20

Teraoka Seisakusho Co., Ltd.

The Company Group business consists of a single segment, manufacture and sale of adhesive tapes. However, the following is an explanation of the state of sales by product division.
In the Packing Tapes segment this term, while consumer-related products, mostly mail-ordersales,
performed well, there was a decline in tape demands related to overseas projects,0
16 17 and18 civil
19 engineering,
20
construction
so consolidated sales for this product were ¥3,622 million (US$33,283 thousand), which is a 2.7% decrease from the previous year. This segment
accounts
Returnfor
on15.8%Averageof total consolidated sales with no change whatsoever from the previous
term.Stockholders' Equity (ROE) (%)
In the Electrical Insulation and Electronic Equipment Tapes segment, automotive equip4
ment tape sales were steady, sales for this sector were only ¥11,696 million (US$107,475
thousand) due to a downward shift of electronic equipment process tapes and tapes foroverseas mobile devices. This was a 4.1% decrease from the previous fiscal year. This seg3
ment
accounts for 51.1% of total consolidated sales and has decreased by 0.7 points from theprevious term.
In the Other Industrial Tapes segment, while new uses as measures against typhoons
2
were
discovered expanding polyethylene cloth tapes, which are major products used in infrastructure and construction, sales for this product segment were ¥7,577 million (US$69,619
thousand) due to withdrawal of some unprofitable products and the downward shift of automo1 equipment tapes. This is a 0.7% decrease from the previous term. This segment accounts
tive
for 33.1% of consolidated sales and increased by 0.7 points above the previous term.
At the same time, looking at results in the Overseas Sales segment, overseas sales forthecurrent
consolidated fiscal year increased by 0.1% over the previous fiscal year, coming to0
17 (US$73,795
18 19 20 thousand). Comparing by segment, Packing Tapes decreased by¥8,03116million
9.7% while Electrical Insulation and Electronic Equipment Tapes increased by 0.2% and Other

20

20

20

Industrial Tapes increased by 5.9%. Overseas Sales accounts for 35.1% of consolidated
sales and this grew by 1.0 points compared to the previous year.

Equity Ratio(%)

Financial Position

100

80

60

40

20

0

16

17

18

19

20

Return on Average
Assets (ROA) (%)
3

2

Cash Flows

10

Total assets for the end of year consolidated accounting decreased by 2.0% from the previous end of year consolidated accounting to ¥35,140 million (US$322,888 thousand).
Total current assets for the end of year decreased by 0.4% from the previous end of year
consolidated accounting to ¥20,846 million (US$191,544 thousand). This was mainly due to adecrease in inventory.
Total fixed assets for the end of year consolidated accounting decreased 4.2% from theprevious end of year consolidated accounting to ¥14,294 million (US$131,344 thousand). Thiswas mainly due to the market value decrease in investment securities due to drop in stock
price.
Total liabilities for the end of year consolidated accounting increased 4.7% over the previous end of year consolidated accounting to ¥7,201 million (US$66,165 thousand).
Out of this, total current liabilities increased by 9.4% over the previous end of term to ¥6,120
million (US$56,236 thousand). This was mainly due to an increase in capital investment.
Furthermore, total long-term liabilities decreased 15.7% below the previous end of year consolidated accounting to ¥1,081 million (US$9,929 thousand).
Total net assets for the end of year consolidated accounting decreased 3.6% from theprevious end of year consolidated accounting to ¥27,939 million (US$256,723 thousand). Thiswas mainly due to a decrease in other difference in securities valuation because of a drop in
stock price and sale of stocks.
The result of these figures is a capital-to-asset ratio of 79.5%, a decrease of 1.3 points
from the previous term.

16 17 18

19

20

Return on Average
Stockholders' Equity (ROE) (%)
4

Capital from operating activities increased by ¥1,458 million (US$13,403 thousand). This
increase on the previous year’s consolidated accounting was ¥1,458 million, the exact sameamount as the previous term. The increase this term was again mainly attributed to depreciation, receivables and inventory.
Cash flow used for investment activities was ¥912 million (US$8,380 thousand). Even in
the activities of the previous consolidated accounting term, ¥883 million was used for investment. This was mainly due to expenditures for acquisition of tangible fixed assets.
There was a ¥272 million (US$2,507 thousand) decrease in capital from financial activities. There was a decrease of ¥399 million in used capital from the previous consolidated
accounting year. The decrease this term was mainly due to dividend payments.
From these activities, consolidated cash and cash equivalents for end of year consolidated accounting were ¥9,192 million (US$84,462 thousand), an increase of ¥233 million(US$2,136 thousand) compared to the previous year end consolidated accounting.

Dividends
3

2

1

0

16

17 18

19

20

TERAOKA considers the payment of dividends to its shareholders as one of our most important business issues, and we operate according to a basic policy of continued stable dividend
payments.
Regarding dividends, in addition to elements affecting the amount, such as business results, current financial state, cash flow, dividend payout ratio, etc., dividends were determinedbased overall considerations of future business strategy, business development policies andprojections, including considerations for ensuring a certain level of flexibility, as well as ensuring capital for investment.
According to our basic stance, the end of term dividend was ¥5.00 (US$0.05) per share,
and combined with the previously distributed interim dividend of ¥5.00 (US$0.05) per share,
the total annual dividends were ¥10.00 (US$0.09) per share.
The payout ratio for this term was 169.5%.

Teraoka Seisakusho Co., Ltd.

9

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSMarch 31, 2020 and 2019

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥ 9,807
5,708
1,035
1,813
1,121
912
458
(8)
20,846¥ 9,425
5,685
1,274
1,715
1,253
1,238
355
(8)
20,937$ 90,117
52,445
9,507
16,65810,300
8,382
4,207
(72)
191,544

Less: Accumulated depreciation ................................................................
Property, plant and equipment, net ...........................................................

11,94022,335
4,034
269
893
2,248
41,719(30,396)
11,323

11,94922,488
4,047
269
172
2,083
41,008(30,226)
10,782

109,709205,228
37,063
2,476
8,202
20,662
383,340(279,298)
104,042

Intangible Assets ..........................................................................................

111

209

1,021

Investments and Other Assets:
Investments in securities (Notes 2-b and 5) ...............................................
Deferred income taxes (Note 2-g) .............................................................
Net defined benefit asset ..........................................................................
Other .......................................................................................................
Less: Allowance for doubtful accounts (Note 2-h) .....................................
Total investments and other assets ............................................................

2,600
97
—
166
(3)
2,860

3,579
35
119
193
(0)
3,926

23,892
887
—
1,529
(27)
26,281

Total assets ........................................................................................

¥ 35,140¥ 35,854$ 322,888

ASSETS
Current Assets:
Cash and time deposits ............................................................................
Notes and accounts receivable – trade ......................................................
Electronically recorded monetary claims – operating .................................
Merchandise and finished goods (Note 2-c) ..............................................
Work in process (Note 2-c) .......................................................................
Raw materials and supplies (Note 2-c) .......................................................
Other .......................................................................................................
Less: Allowance for doubtful accounts (Note 2-h) .....................................
Total current assets ............................................................................

Property, Plant and Equipment (Notes 2-d and 2-f):
Buildings and structures ............................................................................
Machinery, equipment and vehicles ..........................................................
Land .........................................................................................................
Leased assets ............................................................................................
Construction in progress ...........................................................................
Other .......................................................................................................

The accompanying notes to consolidated financial statements are an integral part of these statements.

10

Teraoka Seisakusho Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent Liabilities:
Notes and accounts payable – trade .........................................................
Electronically recorded obligations – operating ..........................................
Lease obligations ......................................................................................
Accrued income taxes ...............................................................................
Accrued expenses .....................................................................................
Other .......................................................................................................
Total current liabilities ........................................................................

¥ 1,298
2,583
19
53
508
1,659
6,120

¥ 1,263
2,603
19
191
593
925
5,594

$ 11,929
23,735
178
490
4,664
15,24056,236Long-term Liabilities:
Lease obligations ......................................................................................
Deferred liabilities taxes (Note 2-g) ...........................................................
Provision for environmental measures .......................................................
Net defined benefit liability .......................................................................
Asset retirement obligations .....................................................................
Long-term accounts payable - other .........................................................
Other .......................................................................................................
Total long-term liabilities ....................................................................

211
38
316
104
304
57
51
1,081

230
284
316
43
301
57
51
1,282

1,938
345
2,899
960
2,795
521
471
9,929

Total liabilities ....................................................................................

7,201

6,876

66,165NET ASSETSStockholders’ Equity:
Common stock .........................................................................................
Authorized: 80,000,000 shares
Issued: 26,687,955 shares as of March 31, 2020 and
26,687,955 shares as of March 31, 2019, respectively
Additional paid-in capital ..........................................................................
Retained earnings .....................................................................................
Less: Treasury stock, at cost ......................................................................
Total Stockholders’ equity ..................................................................

5,057

5,057

46,468

4,644
17,935(462)
27,174

4,644
18,039(462)
27,27842,672
164,806(4,252)
249,694

Accumulated other comprehensive income
Unrealized gains on securities (Notes 2-b and 5) .......................................
Foreign currency translation adjustments (Note 2-j) ...................................
Remeasurements of defined benefit plans ................................................
Total accumulated other comprehensive income ................................
Total net assets ..................................................................................
Total liabilities and net assets .............................................................

764
137
(136)
765
27,939¥35,140

1,445
263
(8)
1,700
28,978¥35,854

7,019
1,265
(1,255)
7,029
256,723$322,888

Teraoka Seisakusho Co., Ltd.

11

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars

Millions of yen

2020¥22,895
17,411
5,484
5,380
104

2019
¥23,558
17,202
6,356
5,212
1,144

2020
$210,377
159,989
50,38849,434
954

14
93
22
(135)
(4)
(53)
247
22
7
213

10
95
18
207
(54)
(91)
—
—
37
222

129
852
206
(1,243)
(39)
(490)
2,275
204
69
1,963

Income before income taxes ..................................................................

317

1,366

2,917

Income taxes:
Current ....................................................................................................
Deferred ...................................................................................................
Total income taxes .................................................................................

162
6
168

294
38
332

1,487
56
1,543

149

¥ 1,034

—
149

—
1,034

Net Sales ......................................................................................................
Cost of Sales ................................................................................................
Gross Profit ...........................................................................................
Selling, General and Administrative Expenses ...............................................
Operating income .................................................................................
Other Income and Expenses:
Interest income .........................................................................................
Dividend income .......................................................................................
Insurance income .....................................................................................
Foreign exchange gains (losses), net .........................................................
Loss on retirement of non-current assets ...................................................
Commission paid ......................................................................................
Gain on sales of investment securities .......................................................
Gain on sales of fixed assets .....................................................................
Other, net .................................................................................................

Net income ...........................................................................................
Profit attributable to non-controlling interests ..............................................
Profit attributable to owners of parent .........................................................
Per Share
Per share of common stock
Net income ...............................................................................................
Cash dividends .........................................................................................

The accompanying notes to consolidated financial statements are an integral part of these statements.

12

Teraoka Seisakusho Co., Ltd.

¥Yen

¥ 5.90
10.00

$

1,374
—
1,374

U.S. dollars¥40.84
14.00

$0.05
0.09

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars

Millions of yen

2020
¥ 149

2019
¥1,0342020$ 1,374

(681)
(126)
(128)
(935)

(402)
112
(72)
(362)

(6,259)(1,159)(1,180)(8,598)Comprehensive Income ................................................................................

¥(786)¥ 672$(7,224)

Total comprehensive income attributable to:Comprehensive income attributable to owners of parent ..........................
Comprehensive income attributable to non-controlling interests ...............

(786)
—

672
—

(7,224)—

Net income ..................................................................................................
Other Comprehensive Income
Unrealized gains on securities ...................................................................
Foreign currency translation adjustments ..................................................
Remeasurements of defined benefit plans, net of tax ................................
Total other comprehensive income ............................................................

Teraoka Seisakusho Co., Ltd.

13

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the years ended March 31, 2020 and 2019

Millions of yen
Accumulated Other Comprehensive Income

Stockholders’ Equity

Balance at April 1, 2018 �������Cash dividends paid ���������������
Net income ����������������������������
Purchase of treasury stock ������
Net changes of items otherthan Stockholders’ equity �����
Total changes of items during
the period ����������������������������
Balance at March 31, 2019 ���
Balance at April 1, 2019 �������Cash dividends paid ���������������
Net income ����������������������������
Purchase of treasury stock ������
Net changes of items otherthan Stockholders’ equity �����
Total changes of items during
the period ����������������������������
Balance at March 31, 2020 ���

CommonStock:

Additional Paidin Capital

Retained
Earnings¥5,057———¥4,644———¥17,385
(380)
1,034
—

—

—

—

—
¥5,057¥5,057————¥4,644¥4,644———654¥18,039¥18,039
(253)
149
—

—

—

—

—
¥5,057—¥4,644(104)¥17,935

Foreign
Remeasure- Total AccumuCurrency
ments oflated Other
Translation
DefinedComprehenAdjustments Benefit Plans sive Income

Total
Treasury Stock, Stockholders’at CostEquityUnrealized
Gains onSecurities¥(462) ¥26,624
—
(380)
—
1,034
(0)
(0)

¥1,847
—
—
—

¥ 151
—
—
—

¥ 64
—
—
—

¥2,062———¥28,686
(380)
1,034
(0)

—

(402)

112

(72)

(362)

(362)

(0)
654
¥(462) ¥27,278¥(462) ¥27,278
—
(253)
—
149
(0)
(0)

(402)
¥1,445¥1,445
—
—
—

112
¥ 263
¥ 263
—
—
—

(72)
¥ (8)
¥ (8)
—
—
—

(362)
¥1,700¥1,700———292¥28,978¥28,978
(253)
149
(0)

—

(681)

(126)

(128)

(935)

(935)

(0)
(104)
¥(462) ¥27,174

(681)
¥ 764

(126)
¥ 137

(128)
¥(136)

(935)
¥ 765

(1,039)¥27,939——

Total Net
AssetsThousands of U.S. dollars
Stockholders’ Equity
CommonStock

Balance at April 1, 2019 ������� $46,468
Cash dividends paid ���������������
—Net income ����������������������������
—Purchase of treasury stock ������
—Net changes of items otherthan Stockholders’ equity �����
—Total changes of items during
the period ����������������������������
—Balance at March 31, 2020 ��� $46,468

Additional
Paid in
CapitalRetained
Earnings$42,672 $165,760—(2,328)
—
1,374
—
—
—

—

—
(954)
$42,672 $164,806

Accumulated Other Comprehensive Income

Treasury
Stock,
at CostUnrealized
Gains onSecurities$(4,251) $250,649—(2,328)
—
1,374
(1)
(1)

$13,278———$ 2,424
—
—
—

$

—

(6,259)(1,159)(1,180)(1)(955)$(4,252) $249,694(6,259)$ 7,019(1,159)$ 1,265(1,180)(8,598)(9,553)$(1,255) $ 7,029 $256,723—

The accompanying notes to consolidated financial statements are an integral part of these statements.

14

Teraoka Seisakusho Co., Ltd.

Foreign
Remeasure- Total AccumuCurrency
ments oflated Other
Translation
DefinedComprehenAdjustments Benefit Plans sive Income

Total
Stockholders’Equity(75) $15,627
—
—
—
—
—
—
(8,598)

Total Net
Assets$266,276(2,328)1,374(1)(8,598)

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

317

¥1,366$ 2,917

1,001
4
(247)
(22)
3
(4)
(107)
—
55

932
54
—
—
(2)
(44)
(105)
0
(127)

9,201
39
(2,275)
(204)
27
(39)
(982)
—
501

212
348
20
83
1,663
107
—
(312)
1,458

(21)
(477)
103
(21)
1,658
105
(0)
(305)
1,458

1,951
3,202
188
761
15,287981—(2,865)
13,403

Investing Activities:
Payment for purchases of property, plant and equipment .........................
Payments for retirement of property, plant and equipment .......................
Proceeds from sales of property, plant and equipment ..............................
Payment for purchases of intangible assets ...............................................
Payment for purchases of investment in securities .....................................
Proceeds from sales of investment securities .............................................
Payments for asset retirement obligations .................................................
Decrease (increase) in time deposits ..........................................................
Net cash used in investing activities ..................................................

(1,030)
—
29
(36)
(3)
286
(3)
(155)
(912)

(685)
(47)
3
(53)
(3)
—
—
(98)
(883)

(9,467)
—
267
(330)
(25)
2,625
(23)
(1,427)(8,380)Financing Activities:
Dividends paid ..........................................................................................
Payment for acquisition of treasury stock ..................................................
Other, net .................................................................................................
Net cash used in financing activities .................................................

(253)
(0)
(19)
(272)

(380)
(0)
(19)
(399)

(2,328)(1)(178)(2,507)

Effect of Exchange Rate Changes on Cash and Cash Equivalents ..........
Net Increase (Decrease) in Cash and Cash Equivalents ...........................
Cash and Cash Equivalents at Beginning of Period ................................
Cash and Cash Equivalents at End of Period ...........................................

(41)
233
8,959
¥ 9,192

58
234
8,725
¥8,959(381)
2,135
82,327$84,462

Operating Activities
Income before income taxes ........................................................................
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization ..............................................................
Loss on retirement of non-current assets ...............................................
Gain on sales of investment securities ...................................................
Gain on sales of fixed assets ..................................................................
Increase (decrease) in allowance for doubtful accounts ..........................
Increase (decrease) in net defined benefit liability ..................................
Interest and dividends income ...............................................................
Interest expenses ...................................................................................
Foreign exchange losses (gains) .............................................................
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable ..........................
(Increase) decrease in inventories .......................................................
Increase (decrease) in notes and accounts payable .............................
Other, net .............................................................................................
Subtotal ...............................................................................................
Interest and dividends income received ..............................................
Interest expenses paid ........................................................................
Income taxes (paid) refund .................................................................
Net cash provided by operating activities ........................................

¥

The accompanying notes to consolidated financial statements are an integral part of these statements.

Teraoka Seisakusho Co., Ltd.

15

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2020 and 2019

1. Basis of Presenting Financial Statements
The accompanying consolidated financial statements of
TERAOKA SEISAKUSHO CO., LTD. (the “Company”) and its
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirements from International Financial Reporting Standards, andare compiled from the consolidated financial statements
prepared by the Company, as required by the Financial
Instruments and Exchange Law of Japan. However, certain
account balances, as disclosed in the basic consolidated
financial statements in Japan, have been reclassified to theextent deemed necessary to enable presentation in a form
which is more familiar to readers outside Japan.
The accounts of overseas consolidated subsidiaries are
based on their accounting records maintained in conformity with generally accepted accounting principles andpractices prevailing in the respective countries of domicile.
For the convenience of readers, the accompanying
consolidated financial statements are presented in U.S.
dollars by translating yen amounts at the rate of ¥108.83=
US$1, the prevailing exchange rate on March 31, 2020.

2. Summary of Significant Accounting Policies
a. Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and five subsidiaries,
TERAOKA SEISAKUSHO (Hong Kong) CO., LTD.,TERAOKA SEISAKUSHO (Shanghai) CO., LTD.,TERAOKA SEISAKUSHO (Shenzhen) CO., LTD.,
SHIN-EI SHOJI CO., LTD. and PT. TERAOKA SEISAKUSHOINDONESIA.
Significant inter-company balances, unrealizedinter-company profits and losses among the companies are entirely eliminated. The assets and liabilities of
the consolidated subsidiaries are incorporated into thefinancial statements at fair value and the difference
between net assets at fair value and investment
amounts are amortized by the straight-line method
over a period of five years.
The fiscal years of overseas subsidiaries end December 31. Overseas subsidiaries’ financial statements are
based on temporary settlement dates of March 31,
2020 and 2019 and are used for the consolidation of
the Company.
b. Investments in securities
Debt securities that are intended to be held to maturity (“held-to maturity debt securities”) are measured
at amortized cost in the balance sheet. Securities otherthan held-to maturity debt securities (“other securities”) are measured at fair value.
Other Securities that have fair values are stated atfair value, with unrealized gains and losses included in
the net assets, net of applicable income taxes. Realized
gains and losses on sales of securities are based on themoving average cost of the securities. Other securities
that do not have fair values are stated at cost16

Teraoka Seisakusho Co., Ltd.

determined by the moving average method. For otherthan temporary declines in fair value, other securities
are reduced to net realizable value by a charge toincome.
c. Inventories
The Company mainly applies the cost method basedon the periodic average method which determines
the amount of the inventories shown on the balance
sheet by writing them down based on the decrease in
their profitability.
d. Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost.
Depreciation is computed principally by the decliningbalance method at a rate based on their estimateduseful lives, which range as follow:
Buildings ................................................ 3~50 years
Machinery and equipment ..................... 4~16 years
Depreciation of the Company and its domestic consolidated subsidiary is computed by the decliningbalance method (excluding buildings (excluding building
attachments) acquired on or after April 1, 1998 andbuilding attachments and structures acquired on orafter April 1, 2016 straight-line method), overseas consolidated subsidiaries adopt the straight-line method.
e. Impairment of assets
Assets are reviewed for impairment whenever eventsor changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying
amount of an asset or asset group exceeds the sum of
the undiscounted future cash flows expected to result
from the continued use and eventual disposition of
the asset or asset group. The impairment loss would

be measured as the amount by which the carrying
amount of an asset or asset group exceeds its recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of the asset or asset group, or the net selling
price at disposition.
f. Leased assets
Under accounting standards generally accepted inJapan, leased assets related to finance leases that do nottransfer ownership of the leased property to the lessee
are depreciated on a straight-line basis, with lease periodused as their useful lives and no residual value.
g. Income taxes
Income taxes are provided based on amounts requiredby the tax return for the period.
The Company has adopted the asset-liability
method of tax effect accounting to recognize deferred
tax assets and liabilities for the expected future tax
consequences of temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purpose, and the amounts used for income
tax purposes.
h. Allowance for doubtful accounts
Allowance for doubtful accounts provides for possible
losses on the uncollectability of receivables at theamount of estimated uncollectability, based on pastexperience of doubtful receivables and individual evaluation of collectability of the receivables.
i. Accrued retirement benefits(1) The method of attributing expected retirement
benefit to periods
The Company applies the benefit formula basis tomeasure the pension obligation. The expected
retirement benefit attributed to periods of service
under the plan’s benefit formula is deemed asarising in each period.
(2) Actuarial gains and losses
Actuarial gains and losses are amortized by the
declining balance method over a certain period (5years) within the average remaining years of serviceof the eligible employees commencing with thefollowing periods.
j. Foreign currency translation
All receivables and payables denominated in foreign
currencies at the balance sheet date are translated into
yen at current exchange rates. The resulting exchange
gains or losses are charged to income.

Balance sheets of consolidated overseas subsidiaries
are translated into yen at the year-end rates except for
stockholders’ equity accounts, which are translated at
the historical rates. Income statements of consolidated
overseas subsidiaries are translated at average rates.
Translation differences are presented as “foreign currency translation adjustments” in the accompanying
consolidated financial statements.
k. Derivatives and hedge accounting
Derivative financial instruments are stated at fair value
unless they are used for hedging purposes.
If derivative financial instruments are used as hedges
and meet certain hedging criteria, the Company and its
consolidated subsidiaries defer recognition of gains orlosses resulting from changes in fair value of derivative
financial instruments until the related losses or gains on
the hedged items are recognized.
However, in cases where forward foreign exchange
contracts are used as hedges and meet certain hedging
criteria, forward foreign exchange contracts and hedged
items are accounted for in the following manner:
If a forward foreign exchange contract is executedto hedge a future transaction denominated in a foreign
currency, the future transaction will be recorded using
the contracted forward rate, and no gains or losses on
the forward foreign exchange contract are recognized.
l. Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows include all highly liquid investments, generally with original maturities of threemonths or less, that are readily convertible to known
amounts of cash and are so near maturity that theypresent insignificant risk of changes in value.
(Related to Consolidated Financial Statement)
The financial importance of “Insurance income” which
was included in “Other, net” under “Other Income andExpenses” in the previous consolidated fiscal year, has
increased, so it has been listed independently for this consolidated fiscal year. We are currently transitioning theConsolidated Financial Statements from the previous consolidated fiscal year in order to reflect this change in display method. As a result, the ¥55 million listed in “Other,
net” under “Other Income and Expenses” in the Consolidated Financial Statements of the previous consolidated
fiscal year has been reclassified as ¥18 million under“Insurance income” and ¥37 million under “Other, net.”

Teraoka Seisakusho Co., Ltd.

17

(Additional Information)(About the effects of COVID-19)
Assuming the social economic activities that have been
considerably stagnated due to the effects of COVID-19
recover to a certain level after a certain amount of time,and it becomes possible for our Group to maintain dealings, we are devising accounting estimates for judgmenton the possibility to recover deferred taxes.

Furthermore, this assumption has a high level of uncertainty. On the other hand, even if infections are subdued
temporarily, in case of extended world economic stagnation due to second and third waves, there is a possibility
this will lead to decreased demand for our Group’s products, which may significantly affect the consolidated financial reports for the next fiscal year and beyond.

3. Contingent Liabilities
Contingent Liabilities in respect of trade notes and export
bills discounted with banks with recourse in the ordinary

course of business were none at March 31, 2019, andamounted to ¥7 million at March 31, 2020.

4. Financial Instruments
Overview(1) Policy for financial instruments
The Company raises the funds by bank borrowings, andmanages funds only through short-term time deposit
and others. The Company uses derivatives for the purposes of managing foreign currency exchange risk related to trading receivables and payables, and does notenter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables – notes receivable and accounts
receivable, and electronically recorded monetaryclaims – are exposed to credit risk in relation to customers. In addition, the Company is exposed to foreign currency exchange risk arising from receivables
denominated in foreign currencies resulting from tradewith overseas customers.
Equity securities – the Company holds equity
securities, which are mainly issued by company who
have business relationships with the Company, andthese securities are exposed to the risk of fluctuation inmarket prices. Trade payables – notes payable andaccounts payable, and electronically recorded obligations – mostly have payment due dates within one
year. A portion of trade payables, which is denominated in foreign currencies, is exposed to foreign
currency exchange risk. Long-term debt is taken out
principally for the purpose of capital expenditure.

18

Teraoka Seisakusho Co., Ltd.

Long-term debt with interest rate fluctuation risks is
carried out on fixed rate loans. Debt is exposed toliquidity risk relating to the funding as described
below.
(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers may
default)
In accordance with the internal policies for managing
credit risk of the Company, the Company monitors
credit worthiness of their main customers periodically,
and monitors due dates and outstanding balances bycustomer.
To minimize the credit risk when entering into
derivative transactions, counterparties are limited tofinancial institutions with high ratings.
(b) Monitoring of market risks (the risks arising fromfluctuations in foreign exchange rates, interest rates
and others)
For equity securities included in investments in securities, the fair values of these securities are periodicallyreviewed and reported to the Board of Directors.
In conducting and managing derivative transactions,the accounting department confirm the effectiveness ofhedging and obtain approval from the responsible
person, depending on the notional contract value,
based on the internal policies and formal regulations onmarket risk for financial instruments.

(c) Monitoring of liquidity risk for financing (the risk that
the Company may not be able to meet its obligations
on the scheduled due dates)
The Company manages the liquidity risk mainly throughthe monthly cash-flow plans, prepared by the Company.
(4) Supplementary explanation of the estimated fair valueof financial instruments
The notional amounts of derivatives listed below are
not necessarily indicative of the actual market risk
involved in derivative transactions.

Estimated Fair Value of Financial Instruments
The carrying value of the financial instruments on the
consolidated balance sheet as of March 31, 2020 and
unrealized gain (loss) are shown in the following table.
The table does not include financial instruments for which
it is extremely difficult to determine the fair value. (Pleaserefer to (2) below).

Millions of yen

Financial Instruments

Carrying

Estimatefair value

Difference(1) Cash and deposits ...................................................................................

¥ 9,807¥ 9,807—(2) Notes and accounts receivable .................................................................

5,708

5,708

—

(3) Electronically recorded monetary claims ...................................................

1,035

1,035

—

(4) Marketable securities and investments in securities .................................

2,581

2,581

—

(5) Notes and accounts payable ....................................................................

(1,298)(1,298)—(6) Electronically recorded obligations ...........................................................

(2,583)(2,583)—(1) Methods to determine the estimated fair value offinancial instruments and other matters related tosecurities and derivative transactions
Cash and deposits, Notes and accounts receivable, andElectronically recorded monetary claims
Since these items are settled in a short period, theircarrying value approximates fair value.
Investment in securities
The fair value of equity securities is based on quoted
market prices.
Notes and accounts payable, Electronically recorded
obligations, and short-term debt
Since these items are settled in a short period of time,
their carrying value approximates fair value.
(2) Financial instruments for which it is extremely difficult
to determine the fair value were as follows:
As of March 31, 2020
Unlisted equity securities

The above financial instruments are not included in thepreceding table, because no quoted market prices are available and it is extremely difficult to determine the fair value.
(3) Redemption schedule for receivables and marketablesecurities with maturities at March 31, 2020
Millions of yen

Due in One
Year or Less

Cash and deposits ......................................
Notes and accounts receivable – trade ........
Electronically recorded monetaryclaims - operating .....................................
Marketable securities andinvestments in securities ...........................
Total ........................................................

¥ 9,807
5,708
1,035
—
¥16,550(4) There are no repayments planned for long-term debt
or other interest-bearing debt after the consolidated
closing date.

Millions of yen¥19

Teraoka Seisakusho Co., Ltd.

19

5. Securities
Historical costs, fair value and gross unrealized gains and losses for marketable securities as of March 31, 2020 and 2019 are
as follows:
Millions of yen

2020
Historical costs

Fair value

Net differences

Gross gains

Gross losses¥1,183¥2,280¥1,097¥1,138¥(41)

Other Securities:
Equity securities ................................................
Other ................................................................

293

301

8

8

—

Total .....................................................................

¥1,476¥2,581¥1,105¥1,146¥(41)

Millions of yen

2019
Historical costs

Fair value

Net differences

Gross gains

Gross losses¥1,218¥3,252¥2,034¥2,034¥—

Other Securities:
Equity securities ................................................
Other ................................................................

298

308

10

10

—

Total .....................................................................

¥1,516¥3,560¥2,044¥2,044¥—

Thousands of U.S. dollars

2020
Historical costs

Fair value

Net differences

Gross gains

Gross losses

Other Securities:
Equity securities ................................................

$10,870$20,950$10,080$10,452$(372)

Other ................................................................

2,689

2,768

79

79

—

Total .....................................................................

$13,559$23,718$10,159$10,531$(372)

Securities that do not have fair values are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

2020

2019

Equity securities ..................................................................................................

¥19

¥19

$174

Other ..................................................................................................................

—

—

—

Total ...................................................................................................................

¥19

¥19

$174

6. Retirement and Pension Plans
The Company has a defined benefit pension plan. Our
domestic consolidated subsidiary and one of overseas
consolidated subsidiaries have retirement lump-sum plans.
In addition, when an employee retires, an employee may
be paid additional retirement benefits that are not part of20

Teraoka Seisakusho Co., Ltd.

retirement benefit obligations. In lump-sum benefit plansoffered by domestic consolidated subsidiary etc. the retirement benefits and liabilities relating to the retirement
benefits are calculated using the simplified method.

The detailed notes relating to defined benefit pension plans for the fiscal year ended March 31, 2020 and 2019 were as follows:(1) Changes in defined benefit obligations
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Beginning balance of benefit obligations ............................................................

¥4,840¥4,684$44,474

Service cost .....................................................................................................

260

249

2,390

Interest cost ....................................................................................................

20

23

186

Actuarial gains and losses ...............................................................................

(61)

53

(561)

Benefits paid ...................................................................................................

(95)

(169)

(871)

Ending balance of benefit obligations .................................................................

¥4,964¥4,840$45,618(2) Changes in Pension Assets
Thousands of
U.S. dollars

Millions of yen

2020

2020

2019

Beginning balance of pension assets ..................................................................

¥4,959¥4,861$45,570

Expected return on pension assets ..................................................................

99

97

911

Actuarial gains and losses ...............................................................................

(250)

(17)

(2,302)Contributions by the employer ........................................................................

203

187

1,865

Benefits paid ...................................................................................................

(95)

(169)

(871)

Ending balance of pension assets .......................................................................

¥4,916¥4,959$45,173(3) Reconciliation of retirement benefit liabilities using the simplified method
Thousands of
U.S. dollars

Millions of yen

2020

2020

2019

Beginning balance of retirement benefit liabilities ...............................................

¥43

¥40

$394

Benefits expenses ............................................................................................

14

3

132

Benefits paid ...................................................................................................

(1)

(0)

(11)

Ending balance of retirement benefit liabilities ...................................................

¥56

¥43

$515

(4) Reconciliation of benefit obligations and pension assets with net defined benefit liability and asset on theConsolidated Balance Sheets
Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

Funded defined benefit obligations ....................................................................

¥ 4,964¥ 4,840$ 45,618

Pension assets ....................................................................................................

(4,916)(4,959)(45,173)

Subtotal ..........................................................................................................

48

(119)

445

Unfunded defined benefit obligations ................................................................

56

43

515

Net amount of liabilities and assets recognized in consolidated balance sheet ....

104

(76)

960

Liabilities (net defined benefit liability) ................................................................

104

43

960

—

Assets (net defined benefit assets) ......................................................................
Net amount of liabilities and assets recognized in consolidated balance sheet ....

¥

104

—

(119)
¥

(76)

$

960

Note: This includes plans using the simplified method.
Teraoka Seisakusho Co., Ltd.

21

(5) Retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen

2020

2020

2019

Service costs .......................................................................................................

¥260

¥249

$2,390Interest costs ......................................................................................................

20

23

186

Expected return on pension assets ......................................................................

(99)

(97)

(911)

Recognition of actuarial gains and losses ............................................................

4

(34)

40

Benefits expenses calculated on the simplified method ......................................

14

3

132

Total ...................................................................................................................

¥199

¥144

$1,837(6) Remeasurements of defined benefit plans (Other comprehensive income)Thousands of
U.S. dollars

Millions of yen

2020
Actual differences ...............................................................................................

2020

2019

¥(185)¥(105)$(1,701)(7) Remeasurements of defined benefit plans (Accumulated other comprehensive income)Thousands of
U.S. dollars

Millions of yen

2020

¥(12)

$(1,809)

2020

2019

Debt securities ................................................................................................................................

71%

67%

Equity securities ..............................................................................................................................

20%

25%

Cash and deposits ..........................................................................................................................

4%

3%

Unrecognized actuarial gains and losses ..............................................................

¥(197)2020

2019(8) Pension Assets① Breakdown of pension assets

Other ..............................................................................................................................................

5%

5%

Total ...............................................................................................................................................

100%

100%

② Rate of expected return on pension assets

Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of
pension assets and current and anticipated future

long-term performance of individual asset classes thatcomprise the funds’ asset mix.

(9) Basic assumptions for calculating benefit obligations

22

2020

2019

Discount rate ..................................................................................................................................

0.4%

0.4%

Expected return rate on plan assets ................................................................................................

2.0%

2.0%

Salary Increase Rate ........................................................................................................................

2.8%

2.8%

Teraoka Seisakusho Co., Ltd.

7. Income Taxes
Deferred income tax assets and liabilities as of March 31, 2020 and 2019 were composed of the following:Thousands of
U.S. dollars

Millions of yen

2020

2019

2020

¥

3
125
13
47
81
2
17
80
2
16
209
94
37
97
112
935
(37)
(357)
(394)
¥ 541

¥

2
116
20
26
101
2
17
80
2
14
221
93
89
97
15
895
(54)
(350)
(404)
¥ 491

$

(6)
(342)
(45)
(89)
¥(482)
¥ 59

(7)
(599)
(40)
(94)
¥(740)¥(249)(55)(3,140)(418)(817)$(4,430)$ 542

Deferred tax assets:
Allowance for doubtful accounts ....................................................................
Accrued bonus to employees ..........................................................................
Accrued enterprise tax ....................................................................................
Unrealized intercompany profits ......................................................................
Loss on valuation of inventories ......................................................................
Depreciation ...................................................................................................
Long-term accounts payable - other ...............................................................
Loss on valuation of investment securities .......................................................
Loss on valuation of golf club membership .....................................................
Net defined benefit liability .............................................................................
Impairment loss ..............................................................................................
Asset retirement obligations ............................................................................
Tax loss carryforward .......................................................................................
Provision for environmental measures .............................................................
Other ..............................................................................................................
Subtotal ..........................................................................................................
Valuation allowance for tax loss carryforwards (Note 2) ..................................
Valuation allowance for deductible temporary difference ................................
Total valuation allowance (Note 1) ..................................................................
Total deferred tax assets ..................................................................................
Deferred tax liabilities:
Reserve for advanced depreciation of noncurrent assets .................................
Unrealized gains on other securities ................................................................
Net defined benefit asset ................................................................................
Other ..............................................................................................................
Total deferred tax liabilities ..............................................................................
Net deferred tax assets (liabilities) ....................................................................

32
1,149
122
435
744
16
159
739
21
148
1,918
864
340
888
1,021
8,596
(340)
(3,284)(3,624)$ 4,972

Notes: 1. The total valuation allowance decreased by ¥10 million. This decrease is due to decrease of the valuation allowance for tax loss carryforwards inconsolidated subsidiaries.
2. The tax loss carryforwards amount and the amount of deferred tax assets by the carryforwards maturity datePrevious Consolidated Fiscal Year (March 31, 2019)
Tax loss carryforwards (a)Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

More than 5 years

Total

88

—

—

—

—

—

¥88 million

Valuation allowance

53

—

—

—

—

—

¥53 million

Deferred tax assets

35

—

—

—

—

—

(b) ¥35 million(a) The amount of tax loss carryforwards is the amount multiplied by the statutory tax rate.
(b) The result of considering prospective taxable earnings based on future earning power of the consolidated subsidiaries, we have determined that the deferred tax assets
pertaining to tax loss carryforwards can be recovered.

Current Consolidated Fiscal Year (March 31, 2020)
Tax loss carryforwards (c)Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

More than 5 years

Total

—

—

—

—

37

—

¥37 million

Valuation allowance

—

—

—

—

37

—

¥37 million

Deferred tax assets

—

—

—

—

—

—

—

(c) The amount of tax loss carryforwards is the amount multiplied by the statutory tax rate.

Teraoka Seisakusho Co., Ltd.

23

A reconciliation on the difference between the statutory tax rate and effective rate on taxable income for the fiscal years
ended March 31, 2020 and 2019 is as follows:
Statutory tax rate ............................................................................................................................

2020

2019

30.6%

30.6%

Entertainment and other non-deductible expenses .........................................................................

1.9

4.0

Dividend and other non-taxable income .........................................................................................

(1.8)

(0.4)

Per capita levy of inhabitant taxes ...................................................................................................

6.1

1.4

Increase in valuation allowance ......................................................................................................

13.6

(3.3)

Tax deduction for research expenses ...............................................................................................

(8.5)

(4.7)

Rate difference from foreign subsidiaries ........................................................................................

0.0

(2.0)

Consolidated adjustment ................................................................................................................

10.6

(1.7)

Other, net .......................................................................................................................................

0.6

0.6

Effective tax rate .............................................................................................................................

52.9%

24.3%

8. Subsequent EventAppropriation of retained earnings
Subsequent to March 31, 2020, the Company’s Board of
Directors, with the approval of stockholders on June 23,
2020 declared a cash dividend of ¥127 million (US$1,164
thousand) equal to ¥5.00 (US$0.05) per share, applicable24

Teraoka Seisakusho Co., Ltd.

to earnings of the year ended March 31, 2020 and payable to stockholders on the stockholders’ register on
March 31, 2020.

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

REPORT OF INDEPENDENT AUDITORS
Independent Auditors’ Report
To the Board of Directors of Teraoka Seisakusho Co., Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Teraoka Seisakusho Co., Ltd., which comprise theconsolidated balance sheets as of March 31, 2020, and the consolidated statements of income, comprehensive income,changes in equity and cash flows for the year then ended, and basis of presenting consolidated financial statements, othernotes and consolidated supplemental schedules.
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of Teraoka Seisakusho Co., Ltd. and its consolidated subsidiaries as of March 31, 2020, and their consolidated
financial performance and cash flows for the year then ended in accordance with accounting principles generally acceptedin Japan.
Basis for Audit Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities underthose standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company and its consolidated subsidiaries in accordance with the
ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management, Audit & Supervisory Board Members and the Audit & Supervisory Board for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing whether it is appropriate toprepare the consolidated financial statements with the assumption of a going concern, and in accordance with accounting
principles generally accepted in Japan, for disclosing, as necessary, matters related to going concern.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the directors’
performance of duties within the maintenance and operation of the financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibilities are to obtain reasonable assurance about whether the consolidated financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion
on the consolidated financial statements based on our audit from an independent point of view. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the decisions of users of these consolidated financial statements. In accordance with auditing standards generally
accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks. The procedures selected depend on the auditor’s
judgement. In addition, we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
• When auditing the consolidated financial statements, obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances in making risk assessments, but not forthe purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used by management and their method of application, as well as
the reasonableness of accounting estimates by management and related notes thereto.

Teraoka Seisakusho Co., Ltd.

25

• Conclude on the appropriateness of management’s use of the going concern basis for preparing the consolidated
financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude thata material uncertainty exists, we are required to draw attention in our auditor’s report to the related notes to the consolidated financial statements or, if the notes to the consolidated financial statements on material uncertainty are inadequate, to express a qualified opinion with exceptions on the consolidated financial statements. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
• Evaluate whether the presentation of the consolidated financial statements and the notes thereto are in accordancewith accounting standards generally accepted in Japan, as well as evaluate the overall presentation, structure, andcontent of the consolidated financial statements, including the related notes thereto, and whether the consolidated
financial statements fairly represent the underlying transactions and accounting events.
• Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its consolidated
subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the consolidated financial statements. We remain solely responsible for our
audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among othermatters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit process, and other matters required by auditing standards.
We also provide the Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that wehave complied with relevant ethical requirements in Japan regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards in order to eliminate or reduce obstruction factors.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company and its consolidated subsidiaries which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

Designated Engagement Partner,
Certified Public Accountant:
Masami, Hiramatsu

Designated Engagement Partner,
Certified Public Accountant:Hideo, Kayashima

Designated Engagement Partner,
Certified Public Accountant:
Yoshiharu Tsukamoto

INOUE AUDIT CORPORATIONTokyo, Japan
22 October, 2020

26

Teraoka Seisakusho Co., Ltd.

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

COMPANY DATA

Company Outline(as of March 31, 2020)

Company NameTERAOKA SEISAKUSHO CO., LTD.

Head Office

4-22, Hiromachi 1-chome, Shinagawa-ku, Tokyo 140-8711, Japan
Tel: 81-3-3491-1141
Fax: 81-3-3491-1143

FoundedFebruary 11, 1921

Incorporated

May 5, 1943

Paid-in Capital¥5,057 million

Employees

539 (730 consolidated)

Board of Directors and Auditors(as of June 23, 2020)

ChairmanKeishiro Teraoka

President

Kenichi Tsuji

Managing Director

Masakazu Naitou

Directors

Taiji Namekawa
Nobuhisa Ishizaki
Tatsuya Kubo

Tatsuya Kamikawa
Noriyoshi Shiraishi
Keiko Hatta
Audit & Supervisory Board Members

Yutaka Nomiyama
Jun Watanabe
Masaki Miyake
Harushige Sakai

Operating Officers

Mitsuhiro Takano
Satoshi Hironaka
Hideyuki Suzuki

Teraoka Seisakusho Co., Ltd.

27

Consolidated Subsidiaries
Shin-ei Shoji Co., Ltd.

Tokyo, Japan

Teraoka Seisakusho (Hong Kong) Co., Ltd.

Hong Kong, China

Teraoka Seisakusho (Shanghai) Co., Ltd.

Shanghai, China

Teraoka Seisakusho (Shenzhen) Co., Ltd.

Shenzhen, China

PT. Teraoka Seisakusho Indonesia

Karawang, Indonesia

R&D Center, Factories and Offices
R&D Center

Shinagawa-ku, Tokyo

Factories

28

Teraoka Seisakusho Co., Ltd.

Ibaraki Factory

Kitaibaraki, Ibaraki Prefecture

Sano Factory

Sano, Tochigi Prefecture

Kannami Factory

Kannami-cho, Shizuoka Prefecture

Branch Offices

Tokyo, Osaka, Nagoya and Seoul

Representative Office

Taipei

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

INVESTOR INFORMATION

Investor Information

Head Office(as of March 31, 2020)

Teraoka Seisakusho Co., Ltd.
4-22, Hiromachi 1-chome, Shinagawa-ku, Tokyo 140-8711, Japan
Telephone: 81-3-3491-1141
Facsimile: 81-3-3491-1143

Financial Year

April 1 to March 31

Common Stocks

Authorized Shares 80,000,000
Issued Shares 26,687,955

Stockholders

3,437

Stock Listing

Tokyo Stock Exchange, Second Section (Code: 4987)

Transfer Agency

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo
100-8212, Japan

Major Stockholders
Number ofshares(thousandshares)Ratio of shareholding (%)

ITOCHU Corporation

6,672.0

26.35

Customers’ Stockholding Group

2,936.9

11.60

1,260.0

4.97

Japan Trustee Services Bank, Ltd.

938.1

3.70

MUFG Bank, Ltd.

818.8

3.23

Keishiro Teraoka

786.6

3.10

Resona Bank, Ltd.

678.8

2.68

Kuniko Teraoka

526.0

2.07

Employees’ Stockholding Group

409.2

1.61

Yasuhara Chemical Co., Ltd.

250.0

0.98

Stockholders

BNP PARIBAS SECURITIES SERVICESLUXEMBOURG/JASDEC/FIM/LUXEMBOURG FUNDS/UCITS ASSETS

Teraoka Seisakusho Co., Ltd.

29

http://www.teraokatape.co.jp

Printed in Japan

12

Teraoka Seisakusho Co., Ltd.